When we think of wedding gifts for the newlyweds what do we typically think of? Silverware, set of dishes, honeymoon trip, furniture, gift certificates etc….
What if, instead of buying the standard, beautiful and useful wedding gifts, people grouped together to contribute to the down payment for the purchase of a home for the newlyweds? Sounds expensive at first, and certainly I am not bringing this to your attention to add another layer of pressure to the daily monetary pressures that we all have. This information is really for those who may want to consider an alternative in the way they disburse their hard-earned savings, and who have the capability to help their friends and family, and not for the kids to put pressure on their parents, relatives or best friends to help them buy a home. That being said, let’s look at some quick math of one of the lowest down payment programs available today. Keep in mind that there are many variations of mortgage programs that have different rates, higher loan-amount ceilings, qualifying criteria and that may allow for co-signers.
There is a program that allows up to a $417,000 loan amount and a three-percent down payment, which can be all gifts and must be paper trailed. In high-cost property areas where values exceed $429,890 (I am not rounding on this because the $417,000 loan amount is set in stone) this program would not work, but homes that are selling at that price and under along with the right qualifying borrower would be perfect (must have earnings and a job). Co-signers on this program are not allowed.
On a $429,890 purchase price the down payment would equal $12,896.70 or about $13,000. There will be closing costs and they will vary depending on the state. There are many possible options to offset closing costs, such as using savings (I know, obviously), seller’s concessions, a buy up of the rate to give a borrower credit or a combination of all of the above. Rents are increasing and it is also anticipated that mortgage rates will as well, so considering this as a possibility is a beautiful thing. A mortgage payment including real estate taxes and insurance (taxes of $900 a month and insurance $125 a month) would be about $2,985 today, which would pretty much be in line with many rents today, but now you have tax deductibility, equity build up and the possibility of property appreciation.
Thoughts to ponder—if Mom and Dad have an unlimited budget, if Grandma and Grandpa have some extra dough, if your best friend owns a hedge fund and owes you a big favor or just maybe you worked during school and saved your own money, consider this option. Alternatively, reallocating the use of funds may be a consideration, such as swapping a big roll-out-the-red-carpet wedding for a smaller, low-key wedding and a home down payment; not going away for Pesach and redirecting the funds for a home down payment; buying a smaller engagement ring and redirecting the funds for a down payment—NOT! Just kidding, relax girls. Anyway, you get the picture.
Program specs:
Up to 97% LTV
First-time homebuyers, move-up borrowers and retirees
Refinances up to 97% LTV, regardless of current mortgage program
No reserve requirements for 1-unit properties
Gift funds eligible for entire down payment
Carl Guzman, NMLS# 65291, CPA, is the founder and President of Greenback Capital Mortgage Corp. He is a residential financing expert and a deal maker with over 25 years’ experience. Carl and his team will help you get the best mortgage financing for your situation and his advice will save you thousands! www.greenbackcapital.com [email protected]
By Carl Guzman
